These days, starting from G20 to Glasgow COP26, climate change is one of the most important discussed topics. Temperature average raising, deforestation and pollution have been the main issue for a long time, but besides the importance of a change that we all need to do, there are the consequences of these new actions. New climate policies bring new economic implications and, according to Nature Energy research, those countries that usually import fossil fuels will benefit from the new market, while those who usually are exporters will risk stranded assets.
Climate change has to be solved using the right policies and in such a way that the countries that are slower in their decarbonization process are not left behind. The countries that will phase out the use of fossil fuels seem to be the most privileged in the future.
The Paris agreement of 2015 has set the goals for the new climate scenario and it implies significant reductions in global fossil fuel use and large markets for low-carbon technology. However, it has been shown that a large quantity of fossil fuel energy will be produced, but will remain “unburned”, such as coal reserves. This could imply a high threat as explained in the research.
The notion that a country should benefit from free-riding on other countries’ climate policies can also be challenged. Incremental decarbonization, increasing energy efficiency, and the economic impacts of Covid-19 have led oil and gas demand and prices to decline substantially. This has affected the viability of extraction in less competitive regions, despite new fossil fuel subsidies in recovery packages, although the recovery has been rapid and generated substantial market uncertainty.
Jean Francois Mercure, professor at University of Exter
The implementation of new renewable energy worldwide has a paradoxical effect on those exporters whose market is founded on fossil fuel. They could find themselves abandoned and terribly devastated from an economical point of view and the risk, as explained by the researcher Jean-Francois Mercure, is that it could bring all countries to a worldwide 2008 similar crisis. The most vulnerable zones are Canada, Brazil, Russia but also the North-Sea zone. Other ones such as EU, Japan, India and South Korea will invest the money into new infrastructures, and energy independence.
Fossil fuel exporters can be economically impacted by the climate policy decisions of other countries through a lower global demand and lower prices, and abandoning climate policies to boost domestic demand or maintain high prices is not sufficient to compensate for declining export
Jean Francois Mercure, professor at University of Exter
Different scenarios are in front of us. The changes that are taken place worldwide have impact on the most vulnerable and not prepared zones. According to this, climate crisis has to be solved wisely, with right tools and measures in order not to leave no one behind.
